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I don’t understand how all of a sudden the shift was made onto the insolvency of RH and that the discussion is less about the original conditions that led up to

by cced 6y ago

I don’t understand how all of a sudden the shift was made onto the insolvency of RH and that the discussion is less about the original conditions that led up to this. I just finished watching a video from Louis Rossmann [1] as well as one from Bruce Fenton [2]. In his video, Rossmann covers the technicalities and systems behind actually __making__ a trade with an app like RH. The videos were very informative and I learned quite a lot. With the exception of his recent interviews, it isn’t exactly clear what Robinhood was supposed to do differently. If my understanding is correct, clearing houses required more money up front to perform trades - RH didn’t have it so they stopped the trades unidirectionally. People got upset that they couldn’t buy but could sell which made it seem like RH wanted to manipulate the price - but isn’t it better than the alternative, the inability to both sell and buy would seem to me worse than what was done. Imagine them closing both and preventing people from selling if a crash occurs. The discussion would simply be « Robinhood stole our gains and wouldn’t let us move our funds ». Now, should it be the case that more money is required up front, intuitively it makes sense, I mean, who is supposed to front the bill on those 5000% returns? The hedge fund that just went bankrupt? Where exactly does this money come from? Isn’t RH just trying to play within the realities of the current system? Genuinely curious. [1]: https://m.youtube.com/watch?v=MAqxQe0l4g0&feature=youtu.be https://m.youtube.com/watch?v=MAqxQe0l4g0&feature=youtu.be [2]: https://m.youtube.com/watch?v=RQTC5f_VR9I&feature=youtu.be https://m.youtube.com/watch?v=RQTC5f_VR9I&feature=youtu.be

prohobo 6y ago
To be honest, it doesn't really matter. This isn't about whether Robinhood technically must or must not do what they're doing, but that the system is setup in such a way that all these claims of "supporting the people" are fundamentally 100% bullshit. Robinhood tanked their credibility by letting the mask slip and people are on that like hyenas because of the irony. Really though, the focus on them is a distraction from the much larger slip by the entire financial system.
- cced 6y ago
  > Really though, the focus on them is a distraction from the much larger slip by the entire financial system. Exactly. I also watched the recent CNBC interview with Chamath Palihapitiya [1]. I would like to it, but CNBC keeps taking it down. In any case, the host really doesn’t seem like he’s there to « get to the bottom of things or to understand » but to push the idea that the problem is anything other than the preconditions that led up to this. Chamath was spot on. [1]: CNBC Chamath Palihapitiya Interview January 27th, 2021
  - yhoneycomb 6y ago
    This one? https://www.youtube.com/watch?v=wgYZk9Mc804 https://www.youtube.com/watch?v=wgYZk9Mc804
  - mateuszf 6y ago
    I have found the whole interview on Reddit - https://vimeo.com/505445024 https://vimeo.com/505445024
- kryogen1c 6y ago
  > these claims of "supporting the people" is fundamentally 100% bullshit. what a world where a free platform takes an action to stay solvent and in business and its a bullshit claim that theyre helping their customers. i guess they shouldve done the more helpful thing and gone bankrupt, illegally allowing trades they cant cover.
  - prohobo 6y ago
    They were dismissive enough of retailers that it didn't even enter their feeble minds that they might need to be able to cover the costs of a real market manipulation, the kind that institutions do all the time without having these kinds of problems. They were always working for their hedge fund investors. They just got a hard slap to the face by the people they claimed to be working for. And honestly, I'm not very impressed by anyone who would defend them.
    - kryogen1c 6y ago
      > They just got a hard slap to the face by the people they claimed to be working for. youre saying WSB making a stock so volatile that a brokerage cant afford to keep it on its books is a moral victory? what morals are you basing this on? > And honestly, I'm not very impressed by anyone who would defend them. we're commenting on an article about how RH had to borrow billions to stay afloat AFTER they already took action to minimize their exposure. they couldve gone under, and were probably insolvent. im not exactly doing mental gymnastics here.
      - zekrioca 6y ago
        > youre saying WSB making a stock so volatile that a brokerage cant afford to keep it on its books is a moral victory? what morals are you basing this on? The person has already answered it: >> the kind that institutions do all the time without having these kinds of problems.
  - Kaze404 6y ago
    What a world where people are more concerned about a single company going under than the fact that the working class is finally doing something against the rigged capitalist system.
- MrMan 6y ago
  What much larger slip ? Risk management practices?
- getlawgdon 6y ago
  "Retail trading" is not even remotely close to "the entire financial system." And it's that kind of casual but enormous misunderstanding that leads to casual, ignorant participation I. retail trading itself.
Miner49er 6y ago
I need to watch your videos and learn more, but to continue your train of thought: If the clearinghouses didn't put these requirements on RH, or ask brokers to stop buying of these shares, I assume they themselves are at risk of going under? (As you said, who's supposed to front those 5000% returns?) If that happens, would it not lead to a cascading failure of both clearinghouses and brokers going under? The end result being a major market crash? The IB CEO seemed to be hinting at something like this on TV yesterday. It seems like there actually may be a lot at stake here, but I imagine that the clearinghouses and brokers will just shut it down again before any of that happens. These means that the WSB narrative is sort of correct. It isn't direct collusion, but all these Wall St. firms are so reliant on each other that they'll always get each others back - if they don't they themselves are likely to go down. EDIT: I just started watching the first video you linked and the CEO of WeBull is basically saying exactly what my comment does, so I guess I should've just watched that first.
- rokobobo 6y ago
  Just to be clear, there aren’t multiple clearinghouses for US equities. There’s one, the DTCC. They handle effectively all of the US equities trades’s settlement cycle. If there’s any kind of doubt that they don’t have enough collateral and they need to take losses, it could cause a lot of chaos. Initiating the kind of “stop all trading” you refer to, is a lot more complicated than it sounds. You would get a sort of a stock market equivalent of a bank run. On the flip side, (1) they’re known to ask people to post more money than necessary, because they like to err on the side of caution, and (2) if they ask you for money, you just post it, or you risk being kicked off from trading US equities for a long time.
- deleted 6y ago
  [deleted]
maxerickson 6y ago
They still shit the bed as a brokerage, which is premised on providing individuals the ability to buy and sell stocks. Not being able to meet the terms of a lending agreement is likely a legitimate reason for altering the services available to their customers, but it is also a massive failure.
Dirlewanger 6y ago
I don't understand why they couldn't just disable margin trading instead of buying the individual stocks. Margin trading was the real problem for them.
Tenoke 6y ago
RH limited 13-14 tickers, while most other brokers limited 0-2. Now, they probably had more comparative exposure to them but also the volatility and price changed massively due to their move. More importantly they didn't communicate any of this in advance - they must've known this was coming yet suddenly stopped all buying and auto-sold everything on margin. It's hard to believe they couldn't have e.g. halted just margin trades a day before, given a warning etc. Instead they pretended everything was fine up until it blew up, and then as their first explanation claimed they are doing it to protect investors. It was only after a lot of outrage and filled lawsuits that they hinted at the real issue. So yes, they could've played this a lot better.
castlecrasher2 6y ago
>Isn’t RH just trying to play within the realities of the current system? If RH had been upfront about it to begin with I think most would understand. The Webull CEO made similar interviews, and explained why they stopped trading; if the RH CEO had done similarly I wouldn't be so suspicious.

by cced 6y ago

prohobo 6y ago

To be honest, it doesn't really matter. This isn't about whether Robinhood technically must or must not do what they're doing, but that the system is setup in such a way that all these claims of "supporting the people" are fundamentally 100% bullshit. Robinhood tanked their credibility by letting the mask slip and people are on that like hyenas because of the irony. Really though, the focus on them is a distraction from the much larger slip by the entire financial system.

cced 6y ago
> Really though, the focus on them is a distraction from the much larger slip by the entire financial system. Exactly. I also watched the recent CNBC interview with Chamath Palihapitiya [1]. I would like to it, but CNBC keeps taking it down. In any case, the host really doesn’t seem like he’s there to « get to the bottom of things or to understand » but to push the idea that the problem is anything other than the preconditions that led up to this. Chamath was spot on. [1]: CNBC Chamath Palihapitiya Interview January 27th, 2021
- yhoneycomb 6y ago
  This one? https://www.youtube.com/watch?v=wgYZk9Mc804 https://www.youtube.com/watch?v=wgYZk9Mc804
- mateuszf 6y ago
  I have found the whole interview on Reddit - https://vimeo.com/505445024 https://vimeo.com/505445024
kryogen1c 6y ago
> these claims of "supporting the people" is fundamentally 100% bullshit. what a world where a free platform takes an action to stay solvent and in business and its a bullshit claim that theyre helping their customers. i guess they shouldve done the more helpful thing and gone bankrupt, illegally allowing trades they cant cover.
- prohobo 6y ago
  They were dismissive enough of retailers that it didn't even enter their feeble minds that they might need to be able to cover the costs of a real market manipulation, the kind that institutions do all the time without having these kinds of problems. They were always working for their hedge fund investors. They just got a hard slap to the face by the people they claimed to be working for. And honestly, I'm not very impressed by anyone who would defend them.
  - kryogen1c 6y ago
    > They just got a hard slap to the face by the people they claimed to be working for. youre saying WSB making a stock so volatile that a brokerage cant afford to keep it on its books is a moral victory? what morals are you basing this on? > And honestly, I'm not very impressed by anyone who would defend them. we're commenting on an article about how RH had to borrow billions to stay afloat AFTER they already took action to minimize their exposure. they couldve gone under, and were probably insolvent. im not exactly doing mental gymnastics here.
    - zekrioca 6y ago
      > youre saying WSB making a stock so volatile that a brokerage cant afford to keep it on its books is a moral victory? what morals are you basing this on? The person has already answered it: >> the kind that institutions do all the time without having these kinds of problems.
- Kaze404 6y ago
  What a world where people are more concerned about a single company going under than the fact that the working class is finally doing something against the rigged capitalist system.
MrMan 6y ago
What much larger slip ? Risk management practices?
getlawgdon 6y ago
"Retail trading" is not even remotely close to "the entire financial system." And it's that kind of casual but enormous misunderstanding that leads to casual, ignorant participation I. retail trading itself.

Miner49er 6y ago

I need to watch your videos and learn more, but to continue your train of thought: If the clearinghouses didn't put these requirements on RH, or ask brokers to stop buying of these shares, I assume they themselves are at risk of going under? (As you said, who's supposed to front those 5000% returns?) If that happens, would it not lead to a cascading failure of both clearinghouses and brokers going under? The end result being a major market crash? The IB CEO seemed to be hinting at something like this on TV yesterday. It seems like there actually may be a lot at stake here, but I imagine that the clearinghouses and brokers will just shut it down again before any of that happens. These means that the WSB narrative is sort of correct. It isn't direct collusion, but all these Wall St. firms are so reliant on each other that they'll always get each others back - if they don't they themselves are likely to go down. EDIT: I just started watching the first video you linked and the CEO of WeBull is basically saying exactly what my comment does, so I guess I should've just watched that first.

rokobobo 6y ago
Just to be clear, there aren’t multiple clearinghouses for US equities. There’s one, the DTCC. They handle effectively all of the US equities trades’s settlement cycle. If there’s any kind of doubt that they don’t have enough collateral and they need to take losses, it could cause a lot of chaos. Initiating the kind of “stop all trading” you refer to, is a lot more complicated than it sounds. You would get a sort of a stock market equivalent of a bank run. On the flip side, (1) they’re known to ask people to post more money than necessary, because they like to err on the side of caution, and (2) if they ask you for money, you just post it, or you risk being kicked off from trading US equities for a long time.
deleted 6y ago
[deleted]

maxerickson 6y ago

They still shit the bed as a brokerage, which is premised on providing individuals the ability to buy and sell stocks. Not being able to meet the terms of a lending agreement is likely a legitimate reason for altering the services available to their customers, but it is also a massive failure.

Dirlewanger 6y ago

I don't understand why they couldn't just disable margin trading instead of buying the individual stocks. Margin trading was the real problem for them.

Tenoke 6y ago

RH limited 13-14 tickers, while most other brokers limited 0-2. Now, they probably had more comparative exposure to them but also the volatility and price changed massively due to their move. More importantly they didn't communicate any of this in advance - they must've known this was coming yet suddenly stopped all buying and auto-sold everything on margin. It's hard to believe they couldn't have e.g. halted just margin trades a day before, given a warning etc. Instead they pretended everything was fine up until it blew up, and then as their first explanation claimed they are doing it to protect investors. It was only after a lot of outrage and filled lawsuits that they hinted at the real issue. So yes, they could've played this a lot better.

castlecrasher2 6y ago

>Isn’t RH just trying to play within the realities of the current system? If RH had been upfront about it to begin with I think most would understand. The Webull CEO made similar interviews, and explained why they stopped trading; if the RH CEO had done similarly I wouldn't be so suspicious.